Private markets are booming thanks to the popularity of alternatives among wealthy retail investors and ‘higher for longer’ interest rates. Once feared, buyout firms such as KKR, Apollo and Blackstone have gone mainstream as they have climbed higher in the Global 2000.
from Sergei KlebnikovForbes Staff
TThese are boom times for the world’s biggest buyout firms and asset managers. With the Federal Reserve now signaling that it may take longer to cut rates than previously anticipated, investors have continued to pour into private market investments, trading liquidity for potentially higher returns. The traditional private equity business remains strong—but it has evolved far beyond the original leveraged buyout model of the 80s and 90s. The game today is called alternatives, with firms buying and building targeted companies in areas such as logistics, infrastructure and healthcare. Retail-friendly funds often with infinite maturities have made alternative investments more accessible to a wider market and the global opportunity is massive.
In addition to private equity, real estate is also a big business for many of these firms. Blackstone’s $337 billion commercial real estate portfolio is unmatched, including 12,000 properties covering 1.1 billion square feet worldwide. Private lending has also become a booming business for these investment giants, including specialist Ares Management, largely thanks to higher interest rates.
According to Morningstar senior equity analyst Greggory Warren, private equity fundraising is on track to surpass last year, and alternative asset managers are still sitting on significant amounts of dry powder. “Investors from time to time [ignore] the historical performance of alternative asset funds compared to traditional mutual funds and ETFs,” he says.
Some of the biggest alternative investment managers, including Apollo, KKR and Blackstone, saw big gains in the rankings from 2023 and a total of over a dozen firms made this year’s Forbes Global 2000, which ranks the 2,000 most public companies. big in the world. A decade ago there were only two such firms in the Forbes Global 2000, which uses a composite score that takes into account revenue, profit, assets and market value.
“We think more equity investors see alternative firms as reliable, non-correlated investments versus passive index or active mutual funds, especially as global public stocks get smaller,” says Kenneth Leon, director of equity research. in CFRA. “We believe that the allocation of private wealth assets to alternative funds can expand from less than 5% to perhaps 10% as this is an untapped market.”
New York-based Apollo Global Management took the top spot this year, climbing 650 places in the rankings to 127th overall on the list. Founded in 1990 by billionaire investors Marc Rowan, Leon Black, Josh Harris and Tony Ressler, Apollo went public in 2011. The asset management firm has had a strong year, posting $34.7 billion in trailing twelve-month revenue. last—the second largest of the group. In the past twelve months, the firm launched its tenth major private equity fund (raising around $20 billion) and completed several major deals, such as the $623 million acquisition of London-based Wagamama owner The Restaurant Group. Apollo also posted the second highest profit ($5.4 billion) and has one of the highest market values ($89.5 billion). Its shares are up 66% since a year ago, compared with a 27% gain for the benchmark S&P 500 index.
A close second was global investment firm KKR, which jumped nearly 700 places to 175th this year. With the group’s third-highest market cap at $92.8 billion, KKR posted $22.7 billion in revenue and nearly $4.1 billion in earnings over the past twelve months. Wall Street analysts are overwhelmingly bullish on KKR shares, which have been down over the past year, rising 99% and far outperforming its peers. The firm’s assets and fee-related income have continued to grow rapidly in recent months, while KKR has continued to make smart deals, such as buying the remaining 37% of life insurer Global Atlantic (it originally bought 61.5 % of shares in October 2020) at the beginning of this year.
The world’s largest asset manager, BlackRock, was ranked 209th on the list this year, rising just six spots from last year. Current chairman and CEO Larry Fink founded BlackRock with seven other partners in 1988 initially as part of The Blackstone Group, but spun off in 1994 and went public five years later. The company had the highest profit of any investment manager in this group at $5.9 billion, while BlackRock also boasts the second highest market value: $120.7 billion. In January, BlackRock spent $12.5 billion to buy Global Infrastructure Partners, which is the largest independent infrastructure manager. BlackRock has consistently posted strong quarterly earnings since last year, but shares of its stock have lagged the market, rising just 15% in the past twelve months. Along with Citadel Securities and more than two dozen other investors, BlackRock is backing the creation of a new Texas Stock Exchange aimed at rivaling the New York Stock Exchange and Nasdaq.
Fourth highest on the 2024 list—and the top-ranked alternative investment management firm last year—is Brookfield Corporation, which fell 63 spots to rank 213. Headquartered in Toronto, the firm had the highest revenue twelve-month high among all alternative investment firms at $101.9 billion. Brookfield is a global infrastructure specialist and the largest clean energy investor in the private markets. The firm has taken advantage of growing demand for wind and solar power by raising billions of dollars for its latest private funds focused around things like the energy transition. Its stock is up 32% in the past year, slightly outperforming the benchmark index over that period.
Rounding out the top five alternative investment managers in the Global 2000 at number 495 is Blackstone, up 153 places. Now the largest private equity firm in the world, it was founded in 1985 by billionaires Peter Peterson (d. 2018) and Stephen Schwarzman, who is the current CEO and chairman. Blackstone has had a banner year: After passing $1 trillion in assets under management last July, in September it became the first alternative investment manager to add shares to the S&P 500. Among firms in the Forbes Global 2000, Blackstone boasts the most market high value of 151.9 billion dollars.
Another notable firm is Ares Management, founded by Antony Ressler and Michael Arougheti in 1997. The private equity outfit jumped 370 places in the Global 2000 rankings this year, ranking 1,342. Like many of its peers, it has benefited significantly from the private credit boom, which accounts for the bulk of its more than $400 billion in assets under management. Shares of the alternative investment manager are up 53% in the past twelve months.
The Carlyle Group, meanwhile, fell 216 places in the rankings from last year, to 1,756 in the overall list. Although shares are up 41% since twelve months ago, the firm had the lowest profits of any alternative investment manager in the group, losing roughly $643 million. Leadership has been a big issue for the Carlysle Group. Billionaire co-founders David Rubenstein, Daniel D’Aniello and William Conway initially passed the baton to former co-CEOs Kewsong Lee and Glen Youngkin in 2018. Youngkin, now governor of Virginia, left Carlyle in 2020. Kewsong Lee resigned in August 2022 after a contract dispute. Carlyle’s last CEO, Harvey Schwartz, has sought to cut costs and turn around lean fundraising.
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